2002 News Releases

For immediate release: February 26, 2002

Dallas Fed Reviews
the Role of Entrepreneurship
and Brazil's and South Korea's Financial Crisis Recoveries

DALLAS—The role
of entrepreneurs in economic theory, Brazil's turnaround of 1999
and South Korea's recovery from the Asian financial crisisare all examined in the latest issue of Economic and Financial
Review, published by the Federal Reserve Bank of Dallas.

In "The Engine of Capitalist
Process: Entrepreneurs in Economic Theory," senior economist Robert
L. Formaini examines why entrepreneurs are the driving force behind
today's market economies. He traces the history of entrepreneurship
in economic theory, showing how the concept's popularity has varied
greatly since its first use. Formaini seeks to examine the concept's
development as one of the key explanatory variables for profit,
economic growth and income differentials. Finally, he investigates
the policy implications of adopting different views of entrepreneurs.

In "Bank and Currency
Crisis Recovery: Brazil's Turnaround of 1999," economists William
C. Gruben and John H. Welch write that of the many countries that
suffered exchange rate crises in the 1990s, Brazil and Korea recovered
most rapidly. The authors analyze the Brazilian recovery, focusing
on the freedom Brazilian bank health gave the central bank to
pursue a postcrisis monetary policy that would settle markets,
reestablish price stability, and encourage investment and the
return of foreign capital. They note that Brazilian bank health
was not an accident; it reflected not only bank responses to precrisis
changes in government regulations, but also to large precrisis
interest rate increases associated in part with Brazilâ??s efforts
to defend its currency.

In "Recovery from a
Financial Crisis: The Case of South Korea," Dallas Fed economists
Jahyeong Koo and Sherry Kiser examine the recovery process of
financial crises, particularly in Korea. They argue that the existing
framework of financial-crisis theories cannot adequately explain
Koreaâ??s rapid recovery and offer an alternative explanation. The
writers conclude that the creation of alternative funding sources
and labor adjustments played a significant role in containing
Koreaâ??s downward spiral.